Custodial company Coverall North America Inc. settled a wage and hour lawsuit, which was initially filed in 2007 by a class of 166 janitorial franchisees. The janitors claimed that they were employees of Coverall even though they were erroneously classified as independent contractors and a lower federal court in Massachusetts had agreed. Law 360 (subscription required) reported that the appeals action was settled a week before arguments were to begin in the First Circuit Court of Appeals.
The plaintiffs secured a $4.8 million class action judgment in 2013. The specifics of the settlement agreement were not disclosed but it is anticipated that it will be filed in the district court soon.
U.S. District Judge William Young determined that Coverall failed to meet the state’s stringent “ABC Test” for proving that it hired independent contractors and not employees. The test required Coverall to prove: the individuals were free from control and direction in connection with the performance of service; the service was performed “outside the usual course of the business of the employer;” and the individuals were customarily engaged in an independently established business of the same nature as that involved in the service performed.
Judge Young ruled that Coverall could not establish that it was involved in a business outside that of the janitors. He found that the plaintiffs and Coverall both sell cleaning services and rejected Coverall’s claim that it was in the business of selling cleaning franchises. His decision initiated comments by attorneys that his ruling could significantly impact franchise business in Massachusetts. The International Franchise Association was concerned about the decision and filed an amicus brief claiming that Judge Young’s decision could have a ruinous impact on franchise operations in the state.
The attorneys in Sommers Schwartz’s Employment Litigation Group have represented many hourly employees in wage and hour violation actions. If you have questions regarding your rights under the federal Fair Labor Standards Act or state employment laws, please contact us today.